Take a 2020 ‘RMD’ Holiday

If you find your spring holiday plans disrupted by the coronavirus, you may be encouraged that the federal government has planned another type of holiday appealing to retirement account holders.

The holiday? In addition to the federal stimulus checks, small-business loans and tax breaks making the headlines, the Coronavirus, Aid, Relief, and Economic Security (CARES) Act passed March 27 also makes available some relief for retirement account owners. It includes a 2020 required minimum distribution (RMD) holiday, additional penalty-free access to retirement accounts, and enhancements to loan provisions from workplace retirement plans.

2020 RMD HolidayRMDs from IRAs, inherited IRAs, 401(k)s and other workplace retirement plans are no longer required in 2020. If you have already taken an RMD this year, you have the option to re-contribute it to your IRA if it was taken within the past 60 days and no other IRA-to-IRA rollover has been made in the past 12 months.

Inherited IRA RMDs that have been taken already in 2020 cannot be rolled back in.

2019 RMDs that were not taken before Dec. 31, 2019 and are due to be taken by April 1, 2020 have also been suspended.

Coronavirus-Related DistributionsYou also can withdraw up to $100,000 in coronavirus-related distributions from retirement accounts. These distributions are still considered taxable income, but you will be able to pay the income taxes over three tax years. They are not subject to the 10% early withdrawal penalty, regardless of your age. In addition, if you choose, you can repay the distribution – in one or more rollover contributions – at any time during the three-year period and avoid paying the income taxes on the distribution. Coronavirus-related distributions are available for distributions taken between Jan. 1, 2020 and Dec. 31, 2020 to qualifying individuals.

Workplace Retirement Plan Loans Are Expanded
Retirement plan loans, if available through an employer’s retirement plan, have been made more liberal for qualifying individuals and will allow loan repayments to be suspended for one year. Typical retirement plan loans can only be in amounts up to $50,000 and can only use 50% of your vested account balance. For new loans taken within 180 days of the CARES Act, the amount is increased to $100,000 and can use 100% of your vested account balance. If you have an existing retirement plan loan, your repayments may also be suspended for one year, if payments are due between now and Dec. 31, 2020.

Who Qualifies for Coronavirus-related Distributions and Loans?Coronavirus-related distributions and loan provisions are available if one or more of the following apply:

You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention.

Your spouse or dependent is diagnosed with such virus or disease by such a test.

You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease.

The CARES Act expands on other previously announced tax relief. Earlier this month, 2019 tax filing and payment deadlines were postponed to July 15, 2020 and the ability to make traditional and Roth IRA contributions were extended to July 15 as well.

DISCLAIMER
The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards & Co. does not provide legal or tax advice, therefore it is also important to consult with your legal and tax professionals for additional guidance tailored to your specific situation.